Core Viewpoint - The behavior of leading funds in the market is determined by the positioning of the market, which in turn influences the structure and pattern of industries that experience growth. Historically, liquidity-driven markets tend to concentrate on strong sectors rather than rotating between high and low performers [1][2]. Group 1: Market Behavior and Trends - In liquidity-driven markets, once a sector gains consensus, its strong performance tends to persist until the end of the market cycle [2]. - Strong sectors often see their peak performance occur later than mid-tier sectors, indicating a lack of significant high-low rotation [2]. - The excess returns of leading sectors compared to mid-tier and low-tier sectors tend to expand throughout the market cycle [2]. Group 2: Investment Focus and Sector Performance - Current focus remains on sectors such as AI, innovative pharmaceuticals, resources, and the STAR Market [1][6]. - In July, sectors with strong industrial trends, such as innovative pharmaceuticals and rare metals, outperformed, with ETFs recording significant gains: Communication ETF at 20.4%, Innovative Pharmaceutical ETF at 16.9%, and Rare Metals ETF at 15.4% [5]. - Conversely, sectors relying on short-term speculative themes, like coal, saw significant pullbacks, indicating a preference for strong trend sectors over low-positioned ones [5]. Group 3: Liquidity and Market Dynamics - Recent marginal slowdown in incremental liquidity suggests that the market needs to cool down for sustainable growth [6]. - Public mutual funds experienced a net outflow of approximately 25.1 billion in July, following a rare net inflow in June, indicating a shift in investor sentiment [7]. - Despite some outflows, industry and thematic ETFs saw net inflows, driven primarily by individual investors, with significant inflows into cyclical, manufacturing, and technology ETFs [7]. Group 4: Sector-Specific Insights - AI sector faces uncertainty regarding the transition from North American supply chains to domestic ones, with current trends reflecting more on industrial trends than pure valuation [8]. - The innovative pharmaceuticals sector is supported by potential business development expectations, with large pharmaceutical companies still having room for valuation growth compared to previous years [9]. - Resource stocks are currently well-matched in terms of fundamentals and valuations, with price increases reflecting earnings elasticity due to supply constraints and slow demand growth [10]. Group 5: Long-term Investment Considerations - The "15th Five-Year Plan" guidance is anticipated to provide clearer, quantifiable constraints on industry capacity expansion, which could stabilize long-term supply-demand relationships [4]. - The semiconductor sector, particularly the STAR Market, is expected to see a resurgence, especially if optimistic guidance is provided by key players like SMIC [10].

Group 1 - The ETF market showed mixed performance on the 31st, with the Nasdaq Technology ETF (159509) leading gains at 2.38% [2] - The US 50 ETF (159577) and US 50 ETF (513850) also saw positive movements, increasing by 2.17% and 2.02% respectively [2] - Conversely, the Hang Seng Consumer ETF (159699) experienced the largest decline, dropping by 7.39% [2] Group 2 - The Real Estate ETF (159707) fell by 4.12%, while the Steel ETF (515210) decreased by 3.98% [2]

Group 1 - The Nasdaq Technology ETF (159509) led the gains with an increase of 2.38% [1] - The US 50 ETF (159577) rose by 2.17% [1] - The US 50 ETF (513850) increased by 2.02% [1] Group 2 - The Hang Seng Consumer ETF (159699) experienced the largest decline, falling by 7.39% [1] - The Real Estate ETF (159707) decreased by 4.12% [1] - The Steel ETF (515210) dropped by 3.98% [1]

Group 1 - The ETF market showed mixed performance on the 31st, with the leading sector being the AI-focused ETFs in the ChiNext market [2] - The Huabao AI ETF (159363) led the gains with an increase of 4.21%, followed closely by the Guotai AI ETF (159388) at 4.11% and the Fortune AI ETF (159246) at 4.02% [2] - In contrast, the real estate ETF (159707) experienced the largest decline, falling by 3.66%, followed by the mining ETF (561330) down 3.41% and the steel ETF (515210) down 3.36% [2]

Market Overview - The Shanghai Composite Index fell by 0.68% at midday, while the Shenzhen Component Index rose by 0.43% [1] - The AI hardware sector saw a significant rally, with multiple ETFs related to artificial intelligence experiencing gains of around 4% [5] - The real estate sector faced notable declines, with ETFs related to real estate dropping by 3.66% and 3.06% respectively [6] Sector Performance - The AI application sector and liquid cooling concepts began to see a rebound, contributing to the overall strength of the AI industry [1] - Innovative pharmaceuticals continued to show strong performance, with several ETFs in this sector rising by approximately 2.93% to 2.55% [5] - Cyclical stocks, including steel, coal, and rare earth sectors, continued to adjust downwards, reflecting a broader market trend [1][6]

Market Performance - As of July 30, 2025, the three major A-share indices showed mixed results, with the Shanghai Composite Index rising by 0.17% to 3615.72 points, while the Shenzhen Component Index and the ChiNext Index fell by 0.77% to 11203.03 points and 1.62% to 2367.68 points respectively [1] - The total trading volume of the two markets reached 1.84 trillion yuan [1] Industry Highlights - The fishery sector performed notably well, surging by 4.06%, followed by the steel and film industries, which rose by 3.30% and 2.76% respectively [1] - A total of 356 non-currency ETFs increased in value, representing 29% of the market [1] - The China Steel Index rose by 1.58%, and the Steel ETF increased by 1.53% [1] - The China Petrochemical Industry Index saw a rise of 1.57%, with the Petrochemical ETF and Chemical Industry ETF increasing by 2.07% and 1.66% respectively [1] - The China Film Theme Index rose by 1.26%, with the Film ETF increasing by 1.64% and another Film ETF by 1.40% [1] ETF Performance - The top-performing ETFs included the Oil and Gas Resources ETF, which rose by 3.25%, and the Petrochemical ETF, which increased by 2.07% [3] - The Steel ETF had a total share size of 23.50 billion units, closely tracking the China Steel Index [5] - The Oil and Gas ETF had a share size of 1.13 billion units, tracking the National Oil and Gas Index [4] Valuation Metrics - The latest price-to-earnings ratio (PE-TTM) for the China National New Hong Kong Stock Connect Central State-Owned Enterprise Dividend Index is 8.74, which is below 99.80% of the time over the past three years [4] - The National Oil and Gas Index has a PE-TTM of 11.34, below 66.36% of the time over the past three years [5] Declining Sectors - A total of 809 non-currency ETFs declined, accounting for 67% of the market [5] - The China Hong Kong Stock Connect Automotive Industry Theme Index and the China Financial Technology Theme Index experienced the largest declines, falling by 4.50% and 2.94% respectively [5]

- Model Name: Diffusion Index Model; Construction Idea: The model is based on the principle of price momentum, capturing industry trends through diffusion indices; Construction Process: The model tracks the weekly and monthly changes in the diffusion indices of various industries, ranking them accordingly. The formula for the diffusion index is not explicitly provided; Evaluation: The model has shown varying performance over the years, with significant drawdowns during market reversals[24][25][28] - Model Name: GRU Factor Model; Construction Idea: The model utilizes GRU (Gated Recurrent Unit) deep learning networks to process minute-level volume and price data, aiming to capture trading information; Construction Process: The model ranks industries based on GRU factors, which are derived from the deep learning network's analysis of trading data. The specific formula for GRU factors is not provided; Evaluation: The model has performed well in short cycles but has shown general performance in longer cycles[31][32][35] - Diffusion Index Model, Average Weekly Return: 0.89%, Excess Return Since July: -3.47%, Excess Return YTD: -0.45%[28] - GRU Factor Model, Average Weekly Return: 4.27%, Excess Return Since July: 1.34%, Excess Return YTD: -4.25%[35] - Factor Name: Diffusion Index; Construction Idea: The factor is based on the momentum of industry prices, capturing upward trends; Construction Process: The factor is calculated by observing the weekly and monthly changes in the diffusion indices of various industries. The specific formula is not provided; Evaluation: The factor has shown varying performance, with significant drawdowns during market reversals[24][25][28] - Factor Name: GRU Factor; Construction Idea: The factor is derived from GRU deep learning networks, capturing trading information from minute-level volume and price data; Construction Process: The factor is calculated by ranking industries based on the GRU network's analysis of trading data. The specific formula is not provided; Evaluation: The factor has performed well in short cycles but has shown general performance in longer cycles[31][32][35] - Diffusion Index Factor, Top Industries: Comprehensive Finance (1.0), Steel (1.0), Non-Bank Finance (0.999), Comprehensive (0.998), Non-Ferrous Metals (0.997), Home Appliances (0.995)[25] - GRU Factor, Top Industries: Banking (3.3), Real Estate (0.58), Oil & Petrochemicals (-1.26), Textile & Apparel (-1.73), Light Manufacturing (-2.49), Electric Power & Utilities (-2.83)[32]

Group 1 - The Yarlung Tsangpo River downstream hydropower project has officially commenced with a total investment of 1.2 trillion yuan, planning to build five hydropower stations, with an annual power generation capacity equivalent to three times that of the Three Gorges Dam, which is expected to stimulate related theme ETFs [1] Group 2 - Various ETFs including construction materials ETF, infrastructure 50 ETF, and chemical ETF have seen increases this week, with over 1 billion yuan net inflow into 43 funds, including steel ETF and construction materials ETF, which have net inflows of 14.24 billion yuan and 11.05 billion yuan respectively [2] - The construction materials ETF tracks the CSI All Share Construction Materials Index, covering sectors such as cement (44.8%), decoration materials (35.3%), and glass fiber (10%), with key stocks benefiting from the Yarlung Tsangpo River project [2] - The infrastructure ETF tracks the CSI Infrastructure Index, encompassing the infrastructure and engineering machinery industry chain [3] - The steel ETF tracks the CSI Steel Index, covering iron ore mining, steel smelting, and processing, aiming to reflect the overall performance of steel-related companies in the A-share market [4] - The chemical ETF tracks the CSI Subdivided Chemical Industry Theme Index, covering various chemical sectors, with leading stocks including Wanhua Chemical and Salt Lake Shares [4] Group 3 - The "anti-involution" policy is expected to optimize the industry landscape, with leading companies likely to see a turning point in profitability, particularly in sectors like steel, glass fiber, and new energy chains, which are currently at historical lows in profitability and capital expenditure [5] - The market is experiencing significant activity with daily trading volume reaching nearly 1.9 trillion yuan, driven by liquidity and policy deployment, with optimistic expectations being rapidly priced in [6] - The main market themes currently revolve around "anti-involution" and large infrastructure projects, with opportunities identified in power equipment, resource products, and construction materials sectors [6] - The "anti-involution" policy is anticipated to bring positive changes to the industry chain, potentially reshaping competitive dynamics and leading to price recovery in some high-end manufacturing sectors [7]

Investment Rating - The report maintains an "Overweight" rating for the industry [1] Core Viewpoints - The report emphasizes the importance of high prosperity investment directions and suggests a continuous focus on these areas for sustained offensive strategies [3][20] Summary by Sections A-share Market Overview (July 21-25, 2025) - The top three broad indices were: STAR 50 (up 4.63%), STAR Composite Index (up 3.95%), and STAR 100 (up 3.72%). The bottom three were: Shanghai 50 (up 1.12%), Shenzhen Dividend (up 1.33%), and Shanghai Index (up 1.67%) [12] - The top three style indices were: Mid-cap Value (up 4.29%), Small-cap Value (up 3.85%), and Mid-cap Growth (up 3.55%). The bottom three were: Large-cap Value (down 0.11%), Financial (up 0.36%), and National Value (up 1.32%) [14] - The top three Shenwan first-level industry indices were: Building Materials (up 8.20%), Coal (up 7.98%), and Steel (up 7.67%). The bottom three were: Banking (down 2.87%), Communication (down 0.77%), and Utilities (down 0.27%) [18] A-share Market Outlook (July 28 - August 1, 2025) - The macro model continues to signal holding positions, indicating that any short-term adjustments may be limited in time and space, presenting new opportunities [20] - The technical timing model shows that the Wind All A Index has a risk level of 106.78 and a composite momentum score of 69.78, indicating a strong upward trend and potential for increased volatility and sustained growth [20][24] - The report suggests maintaining positions in the A-share market, focusing on high prosperity trends, and highlights structural market movements, particularly in the STAR 50 and semiconductor sectors [21][23] Fund Allocation Recommendations - The report recommends a balanced ETF allocation strategy, emphasizing the importance of selecting ETFs with a minimum one-year establishment period and a fund size exceeding 100 million [67][68] - The report lists several recommended ETFs, including those focused on steel, non-ferrous metals, robotics, and 5G communications, among others [70]

Group 1 - The stock indices collectively rose this week, with the Shanghai and Shenzhen stock markets seeing a net inflow of approximately 4 billion yuan into stock ETFs and cross-border ETFs [1][4] - The Shanghai Composite Index closed at 3593.66 points, up 1.67% for the week, while the Shenzhen Component Index closed at 11168.14 points, up 2.33% [2] - Major industry-themed ETFs such as steel, chemicals, and infrastructure received significant inflows, while technology-related ETFs like those focused on semiconductor and military sectors faced outflows [5][8] Group 2 - The steel ETF saw a net inflow of 14.24 billion yuan, the chemical ETF 13.90 billion yuan, and the infrastructure ETF 12.16 billion yuan, indicating strong investor interest in these sectors [5][6] - In contrast, the semiconductor ETF experienced a net outflow of 9.26 billion yuan, with significant reductions in shares for military and medical ETFs as well [8] - The overall market sentiment is supported by stable policy expectations, increased market liquidity, and heightened investor activity, which are driving the strength of A-shares [4][11] Group 3 - The Hong Kong securities ETF had a weekly trading volume exceeding 100 billion yuan, indicating robust trading activity in the region [12][14] - Several ETFs reached new highs in trading volume, reflecting a positive market trend and investor confidence [13][14] - The implementation of infrastructure projects, such as the Yarlung Tsangpo River hydropower project, is expected to boost demand for materials in the steel and cement industries [11]